China Netcom drops IPO share price

Fading interest in Chinese companies

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China's second largest fixed line telco has cut the likely price of shares in its Initial Public Offering (IPO). US shares in China Netcom will go on sale for between $20.24 and $23.12. Netcom is selling 47m American Depositary Shares, representing 941.39m ordinary shares. This values the company at about $1bn, substantially lower than the $1.5bn that was expected. This reflects fading interest in Chinese companies, according to the FT.

The offering opens 4 November and runs until 9 November. Shares will list in the US 16 November and the next day in Hong Kong. The company is hoping to attract plenty of international investors by offering large dividends. Netcom is promising to distribute as much as 40 per cent of profits in dividends to shareholders.

China Netcom has 77.6m fixed-line subscribers in northern China. It has 4.2m broadband subscribers. It is expanding services in the south of the country where it competes with China Telecom. Goldman Sachs and China International Capital Corp are overseeing the IPO.

The telco is in ongoing talks to buy a stake in Hong Kong's largest fixed-line operator PCCW. The Chinese government will retain a 70 per cent in the company after flotation. ®